Directors and Officers Insurance in Texas

What is directors and officers insurance? 

Leading an organization often brings significant responsibility, for senior leaders’ decisions can affect the entire organization that they’re in charge of. While the organization is hopefully affected in positive ways, sometimes even the best leaders make mistakes that have negative impacts. Should someone leading a Texas organization make such a mistake, they may be held personally liable for the negative impacts that their decision or action has. Thankfully, there’s directors and officers insurance to help with this risk.

Directors and officers insurance can provide important protections for those who lead organizations. If their decision or action has major negative consequences, D&O coverage may provide protection.

Who needs D&O insurance in Texas? 

Anyone who has significant decision-making responsibilities for a Texas organization might want D&O insurance. This includes leaders of both nonprofit organizations and for-profit companies. 

For example, people in the following positions might want D&O coverage:

• Board chairs and members
• Executives such as CEO, COO, CFO, CMO, etc.
• Presidents, VPs and department directors
• Treasurers and trustees
• Other high-ranking officials

Any leaders who aren’t sure whether they ought to have D&O coverage in place can talk with an insurance agent who specializes in this insurance. A specialized agent will understand how D&O insurance provides protection, and whether its protections would be helpful for a specific role within an organization.

What types of claims can be covered by D&O policies? 

D&O insurance primarily covers claims arising from leadership decisions or actions that a high-ranking leader takes. Depending upon a policy’s particular terms and conditions, it might cover claims arising from:

• Misleading statements or misrepresentations
• Failure to comply with regulations or other laws
• Poor governance resulting in filing bankruptcy
• Mishandling funds
• General lack of corporate governance

While the protections offered by D&O policies can cover diverse decisions and actions, these protections do have limitations. Policies generally don’t cover simply bad business decisions. They typically exclude intentional acts of fraud, or blatantly illegal actions.

Do D&O policies cover breaches of fiduciary duty allegations? 

In cases where fiduciary leaders are accused of prioritizing personal gains over the interest of their organization, a D&O policy might indeed provide protection. Many policies cover allegations that someone has breached their fiduciary duty.

Because the particular terms of individual policies can vary, fiduciaries should confirm that a chosen policy does indeed cover such allegations. They can check this by working with an experienced insurance agent when comparing policies.

Are attorney fees and court fees covered by D&O insurance? 

D&O policies typically pay legal costs, including attorney fees and court fees, when there’s a covered claim. Coverage normally begins when the claim is filed (as opposed to when a case is adjudicated), and after the initial deductible is met. This is broadly true for most liability insurance coverages.

How are D&O policy premiums calculated? 

The rates set for D&O policies are based on several factors. A few of the data points that insurance companies look at include:

• Insured individual’s role and experience
• Organization’s size and operations
• Sector the organization is in
• Financial position of the organization
• Any previous claims or lawsuits

An independent insurance agent can help compare quotes from several insurers, to find out how much an organization will pay for coverage. Organizations are normally the ones to pay, since leaders only need the coverage because of their service to the organization.

Where can Texas’s leaders acquire directors and officers insurance? 

For help finding directors and officers insurance in Texas, contact the independent insurance agents at Steve White Insurance. Our team will make sure your business or nonprofit’s leaders, including yourself, are protected well.